JP Morgan, the Grim Reaper? (HBOS Edition)

JP Morgan looks again to be at the center of a plan to resolve, as one might put it politely, a troubled financial institution, in this case, the UK’s largest mortgage lender, HBOS.

However, aside from the fact JP Morgan’s initiative, if successful, would represent the end of HBOS, the parallels to Bear Stearns diminish quickly. According to the Telegraph, HBOS would be broken up and prices sold, with JP Morgan acting as an arranger, not a principal.

One odd part of the speculation cited is that a large Australian bank is thought to be one of the interested parties. The Telegraph says it is thought to be National Australia Bank. However, the NAB just announced CDO losses of A$830 million and its stock fell 14%, so the bank is probably not up to any venturesome moves right now, unless the purchase size is relatively small.

From the Telegraph:

JP Morgan, the US banking giant that rescued Bear Stearns earlier this year, has held talks with several interested parties about forming a consortium to break up HBOS, the UK’s biggest mortgage lender which includes the Halifax brand.

JP Morgan is understood to have spoken to a large Australian bank, thought to be National Australia Bank (NAB).

It has also approached private equity firms. Spain’s Santander could also be approached, sources said.

The model bears a resemblance to break-up bid for ABN Amro last year. JP Morgan could act as the adviser to the group, playing the same pivotal role as Merrill Lynch in the ABN deal….

However, the US bank is unlikely to want to buy any of the large constituent parts of HBOS as it has no retail banking operations in the UK and is still bedding down its acquisition of stricken US bank Bear Stearns.

NAB, which owns Clydesdale and Yorkshire Banks in the UK, has been tipped as a possible buyer of HBOS’s Australian division, BankWest.

NAB may also be interested in HBOS’ corporate banking arm, which makes up most of the Bank of Scotland business….

Rumours earlier this week that BBVA, Spain’s second biggest bank, may be interested in swooping on HBOS were wide of the mark, sources said.

But several bankers have told The Daily Telegraph that JP Morgan has been working on a potential consortium bid for some time.

They added that a consortium has not yet been formed and the talks could fall through. A break-up bid for HBOS might meet opposition from the Financial Services Authority, which would not want one of Britain’s biggest banks to be destabilised.

However, if the deal saw NAB and possibly Santander take the majority of the assets, the FSA might not stand in the way, observers said.

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  1. Anonymous

    JP Morgan is going to pop up in a lot of rescue deals and postmortems over the next few years. It’s one of the few heavy duty finance houses which is still reasonably solid and well-managed.

  2. vlade

    NAB said few days back (when it pulled out of looking at ABN AMRO AU/NZ) that it wasn’t interested in BankWest. I’d guess that it said those two things at the same time as deciding to take the plunge with the CDO writedowns.

  3. Ginger Yellow

    Santander already owns Abbey. I doubt the regulator would want to see the UK high street become even more consolidated.

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